It's Not Over: Report Warns Shadow Inventory Threat Remains

It's Not Over: Report Warns Shadow Inventory Threat Remains

Daily Real Estate News |
Sunday, June 02, 2013

Foreclosures have been falling in recent months, but two government watchdogs warn that the foreclosure crisis isn’t over yet. About 1.7 million borrowers have missed more than one payment on their government-backed mortgages, according to a newly released report by the inspectors general of the Federal Housing Finance Agency and Department of Housing and Urban Development.

The shadow inventory is made up of loans that have been delinquent for at least 90 days. If these delinquent loans become foreclosures, they could pose significant financial challenges to mortgage giants Fannie Mae, Freddie Mac, or other federal housing agencies, the report notes.

"Not only are current REO inventory levels elevated ... they may rise over the next several years depending on the number of shadow inventory properties that are ultimately foreclosed on," the report stated.

According to the report, the shadow inventory is more than seven times the inventory of REOs that Fannie Mae, Freddie Mac, and HUD currently own.

"Even a fraction of the shadow inventory falling into foreclosure could considerably swell ... inventories of REO properties," the report notes.